Good morning and thank you for participating in Tennant Company’s third quarter earnings conference call. This call is being recorded. If you do not wish to participate, you may disconnect at this time. (Operator instructions) Beginning today's meeting is Tom Paulson, Vice President and Chief Financial Officer for Tennant Company. Mr. Paulson. You may begin.

Thanks, Abigail. Good morning everyone, and welcome to Tennant Company's third quarter 2008 earnings conference call. I'm Tom Paulson, Vice President and Chief Financial Officer of Tennant Company. With me on the call today are Chris Killingstad, Tennant's President and CEO; Pat O'Neill, our Treasurer; and Karen Durant, our Corporate Controller. Our agenda this morning is to review Tennant's performance during the quarter and first nine months and our outlook for the remainder of 2008. First I'll review the financials and then Chris will update you on our operations. After that we will open up the call for your questions. Before we begin, please be advised that our remarks this morning and our answers to questions may contain forward-looking statements regarding the company's expectations or future performance. Such statements are subject to risks and uncertainties and our actual results may differ materially from those contained in the statements. These risks and uncertainties are described in today's news release and the documents we file with the Securities and Exchange Commission. We encourage you to review these documents, particularly our Safe Harbor statement, for a description of the risks and uncertainties that may affect our results. Additionally, this conference call includes discussion of non-GAAP measures that include or exclude unusual or non-recurring items. For each non-GAAP measure, we also provide the most directly comparable GAAP measure and our earnings release issued today includes a schedule that reconciles these non-GAAP measures to our GAAP results. Our earnings release was issued this morning via Business Wire and is also posted on the investors section of our website at TennantCO.com. In my comments today all references to earnings per share are on a fully diluted basis. Also please note that as I go through the financials that I will generally not be commenting specifically on…

Thanks, Tom, and thank you all for joining us this morning. We are pleased to report a solid third quarter especially given the tough economic climate. During the quarter we continued to make progress against a strategic objectives. On the growth side this is introducing new products and expanding our markets. We also continue to closely monitor our cost structure and leverage our efficiencies. As a result we achieved sales growth in the quarter across all of our regions and particularly in our emerging markets such as China and Latin America. We also continued to drive gross margin improvement through a combination of higher selling prices, cost reduction programs, and global sourcing efforts. Throughout this year the most significant risks to our performance had been rising commodity cost and continued economic uncertainty in North America and in Europe. With the recent global financial crisis we have seen the downturn in the US economy adversely impact other regions, most notably Western Europe. During this period of economic uncertainty our approach will be to continue to make selective and highly disciplined investments in our business that are balanced against our current rate of growth and that help protect our overall profitability. Against that backdrop I would like to briefly review the results from our three business regions, discuss our cost control actions, and outline our efforts to continue growing the business. But before doing so, I would like to note two events for which Tennant received recognition. First, we accepted the prestigious R&D 100 Award into Chicago last week from R&D Magazine for our EC [ph] water technology. EC water was selected by R&D Magazine as one of the 100 most technologically significant products introduced into the marketplace over the past year. And second Tennant was recently named by Forbes Magazine as…

Thank you, Chris. As a reminder we do not provide quarterly guidance. Looking ahead to the fourth quarter and beyond as you will recognize it is difficult to predict what impact the global financial crisis will have on our customers. Our outlook is based on what we know at this point in time. We now anticipate full-year 2008 earnings in the range of $1.97 to $2.07 per diluted share. This reflects the $0.19 per share net benefit of unusual items recorded in the 2008 third quarter, including benefits from both the foreign currency forward contracts settlement net gain and discrete tax items and a lower base guidance range for current economic conditions. This range includes the impact of our three 2008 acquisitions, Applied, Alfa, and Shanghai Shen Tan, which are expected to be continued to be modestly dilutive in the fourth quarter due to economic conditions. Our outlook for the reminder of 2008 assumes further economic deterioration in North America and Europe, essentially flat organic growth globally. Our base tax rate for 2008 of approximately 36% and insignificant discrete tax items for the fourth quarter. Previously our outlook for the full year 2008 earnings per diluted share was in the range of $1.85 to $2.10. Earlier this year when the global economic conditions where relatively stronger we believed that we would achieve our goal of 9.5% operating margin in the fourth quarter of 2008. While we still view this as an attainable interim goal we do not anticipate reaching it this year given the further economic deterioration that we expect in North America and Europe. We’ll believe our business has the opportunity over the next few years to achieve further operating margin improvement beyond the 9.5% interim goal. We expect to be able to provide an update to our strategic goals when we are in a position to provide annual guidance for 2009. Orders in our fourth quarter to-date have been slow and the shaky global economy presents a serious challenge. Despite the current economic uncertainties, our strategies are working. Our business model is sound. We are well positioned to compete in our global markets and we remain confident in the long-term strength and growth potential of Tennant’s business around the world. With that we like to open up the call to any questions. Abigail.

(Operator instructions) Your first question comes from Ted Kundtz with Needham. Your line is open. Ted Kundtz – Needham: Thank you. Hello everyone.

Hi, Ted.

Hi, Ted. Ted Kundtz – Needham: A couple of questions, one, could you talk about your target for cost reduction next year?

You know, we’re not prepared to give a specific target for next year Ted. What I will say is that on an interim basis, meaning over the next call it three years or so and hopefully sooner than that we would like to see ourselves get to an operating expense as a percent of revenue target in the 27% range. As you know now we’re more in the 31% range and that expense is excluding R&D. You know we view it as a significant opportunity and it will become an area of focus for us going forward as well as a continued focus against growing the top line obviously. Ted Kundtz – Needham: Okay, how about the impact – are you seeing any benefit from the cost deflation going on here. A lot of the component prices may be going down here and what kind of benefits do you think you could get from that environment?

You know, we certainly hope that we see a benefit from that we go into next fiscal year. What we’re seeing right now to-date as we are entering the fourth quarter is a couple of different things. One, I would like to remind you that we have been aggressively pushing off costs increases with our suppliers and we are starting to see some of those increases come at us even though we’re seeing hopefully some deflation in that area in the fourth quarter but we are – some of the push offs that we would have, we will start to see that come and we believe hit us in the fourth quarter. The other area that we have fairly significant exposure to is steel and also to derivatives of oil in the plastics area, in the resins area, and we are not seeing declines in those areas yet. And from a steel standpoint and from a resins and plastic standpoint, we are not seeing our suppliers pass on declines to us and so we aren’t seeing those benefits as you might expect yet in the fourth quarter. We do certainly hope that we see some benefit as we go forward next year. Ted Kundtz – Needham: Okay, yes, I would think you would.

We should hope so. Ted Kundtz – Needham: Yes, for sure. Can you talk a little about the new product goals for ’09, the new product introduction goals for ’09?

You know I think the only thing that and I will see if Chris wants to jump in and say more about this, the only thing that we’ve talked specifically about is that we do intend to take our EC water technology and expand all Walk-Behinds and put it on ride machines and we would anticipate to do that early in the year. You know, we will continue to have a goal of our new products being in excess of 30% of our revenue from products introduced in the last three years. I’m certainly not ready to commit that we’ll be at the kind of levels we have been this year but new products will continue to be a really important part of our organic growth going forward.

Now we continue to invest in excess of 3% of sales in R&D. The product pipeline remains robust. We have not divulged publicly yet what our plans are for next year but we hope to have some interesting new products in the marketplace. Ted Kundtz – Needham: You traditionally try to get half a dozen or so new products out in the market, every year 5 or 6, something like that?

I don’t think how to say, anywhere between – you know between 3 and 8 if you look back historically, absolutely Ted Kundtz – Needham: And you expect that as well.

Yes. Ted Kundtz – Needham: And one last question, the D&A went up, you know is that going to be the current run rate, did the 6.9 in the quarter in depreciation and amortization up from $5 million in Q2. Is that the run rate going forward?

Ted Kundtz – Needham: Okay, so it did jump up a bit. Okay, thanks. I will jump back in. Thanks.

Your next question comes from Seaver Wang with Utendahl Capital Partners. Your line is open. Seaver Wang – Utendahl Capital Partners: Hi, just had a couple of questions. With the – you know you have done a very good job of diversifying your markets especially to outside of North America. With the strengthening of the dollar what kind of effects did they have on you, and then just another quick question on margins for the smaller products that people are kind of gravitating to now?

What was the question specifically on the margin Seaver, I’m sorry I didn’t catch it? Seaver Wang – Utendahl Capital Partners: Just, are they comparable to the larger –

Yes, sure. Let me comment on both of those, one, we – our sourcing – our strategy overall is to really as much as possible to manufacture in the same currency that we sell in. So we would hope that we won’t see any material or would not expect to see any material impact on a margins overall as we go forward with the strengthening of the dollar. Clearly on a reported revenue basis, you know, we’re not going to have the kind of increases we have been seeing. I mean, this quarter I believe our revenues were up 3% relative – related to currency it was 5% last quarter and that is going to be quite different in the fourth quarter but overall given our strategy the way we source, we don’t see the currency changes having a material impact on our margin structure. As you go to small product margins, I mean I’m talking in generalities here but our larger equipment tend to have slightly higher margins than our smaller equipment but it is not significantly different. We have made great progress over the last several years to continue to enhance the margins of our small products through multiple different efforts, lean sourcing, higher revenue levels, and now they are still slightly lower by quite comparable. Seaver Wang – Utendahl Capital Partners: But obviously the margins or I guess the profit per unit –

Is lower, certainly yes. I am talking on a percentage gross margin basis. Seaver Wang – Utendahl Capital Partners: What are – I mean are they going from a 15,000 machine to 10,000 machine or what is the kind of –

It is such a wide range Seaver. It is really hard to comment. I mean, as you know, I mean our larger equipment can vary from, you know, $20,000 machines up to $180,000 machines and our small equipment is you know, can be in that $3,000 range up to a fair amount higher than that. So, it is really hard to comment specifically there. Seaver Wang – Utendahl Capital Partners: Okay.

Your next question comes from Clint Morrison with Feltl and Company. Your line is open. Clint Morrison – Feltl and Company: Hi, guys.

Hi, Clint. Clint Morrison – Feltl and Company: EC water, obviously it sounds like it has been very successful and I know you are giving up charge and improve margins, can you give us any kind of sense sort of what is the additional sort of profit and the pricing you are getting on that new technology and as your thoughts change at all with that being accepted as aggressively as it appears to have been.

You know, I will comment on a couple of pieces, (inaudible). We are – we still continue to believe we will get an upshot for that product. It varies fairly dramatically given, you know, the price of the equipment that we are selling, but it is somewhere north of 15% up charge and you know we hope that on a sustainable basis it will be higher than that, but we do firmly believe that we will get an up charge from it. The other side is that, I mean it is part of our strategy as we introduce products with new technology that the products are replacing will have higher gross margins and we anticipate that products with this technology on it will have higher margins than our products that don’t have them. Clint Morrison – Feltl and Company: Okay, mechanical question. I know your goodwill intangibles dropped about 10 million bucks from the last quarter, was there a reevaluation or what went on there?

Want to comment here.

Sure. We had our valuation report completed for our Applied acquisition and we did end up with a larger intangible value primarily related to the valuation for the UK customer list. So, there was an increase in the intangible for that and similar to the previous question we did then also have a corresponding up-tick in our amortization expense. Clint Morrison – Feltl and Company: Okay, thank you.

You are welcome.

Your next question comes from Ted Kundtz with Needham. Your line is open. Ted Kundtz – Needham: Great thanks. I have two follow up questions. Are you seeing any pricing pressure on your existing equipment? You mentioned the shift of people going to maybe some lower cost equipment but how about any pricing pressure from your competitors?

Ted Kundtz – Needham: Okay. And just a second question is your current cost structure at least the way you are targeting it for the fourth quarter kind of in line with a focus for a zero growth, organic growth, kind of but no [ph] zero unit growth type environment?

We are assuming that essentially we will see flat organic growth. Obviously, the acquisitions will add on to that and you know what I would say the easiest way to comment on the operating expense side of that would be Ted, we will continue to spend within range in R&D. So we will continue to be somewhere within the 3% to 4% on the R&D side. On the rest of our operating expenses, we should be somewhere between a percentage point to 1.5% lower than prior year. So we will see in the fourth quarter some acceleration of our operating expense, or lowering of our operating expenses as a percent of revenue as we see more of the full benefits of our actions. And yes, we are as prepared as we can be for a no growth kind of environment in the fourth quarter based on the way things have started out. Ted Kundtz – Needham: Okay. Have you – can you share any thoughts about your next year outlook at all in terms of the –

We are – Ted Kundtz – Needham: Or are you still thinking the same way for the rest of the (inaudible).

I just wish we could. We’re just – we’re not prepared to do that. We certainly would anticipate that we’d provide our point of view on next year in our next call which is what we have typically done. So I wish we could but we – we’re just not prepared to do that as a lot of companies are. Ted Kundtz – Needham: I guess if we go into a more sharper slowdown in the early part of next year are you prepared to just cut costs further?

Yes. Ted Kundtz – Needham: c:

We absolutely have a contingency plan. We have been – we honestly as we talked before we entered the year too aggressively from a top line growth standpoint. We put together detailed plans that would – we will be prepared to execute if depending upon the length of the downturn and how it plays out and we’re very serious about the fact we worked extremely hard over the last couple of years to not only take our gross margins up but also improve our operating margins. And if the economy gets tough we’re going to work like heck to make sure we maintain the gains that we’ve had over the past few years. Ted Kundtz – Needham: Okay. And do you think your cost reduction efforts in a global outsourcing could it be the same relative number as it is this year, is that still a possibility, is that still on plan to continue that effort?

What I would say is that we haven’t given a specific numbers embedded in the $10 million to $12 million but what I would say is that given the strength of our low cost sourcing efforts we believe that we can have another year of maintaining that savings level and having a similar savings level next year. So we feel – we’re very bullish on our sourcing efforts. Ted Kundtz – Needham: Terrific. Okay. Thank you.

Your next question comes from James Bank with Tim & Company. Your line is open. James Bank – Sidoti & Company: .:

Hi, James how are you doing? James Bank – Sidoti & Company: Good. I was wondering, I know you can’t quantify ’09 but I was wondering if you could quantify it a little bit more. Obviously, you are GDP plus company, we can also see what is going on out there but I would like to know what was the weight in your environment back in the 2002, 2003 time with building service contracts versus the weight now?

All we could really comment there is really small. Building service contractors weren’t even on our radar screen during the last economical downturn. So, it is very different today than it was back then.

We were a predominantly industrial equipment company. Our commercial product offering has not been developed. We had very, very small part of our sales in that segment of the market and we hadn’t really expanded internationally yet either. So, we have a much more diversified presence today. We are building service contractors still. I still think we are underrepresented in building service contractors and so it is a big growth opportunity for us, which is a good thing in this environment because they tend to maintain their cleaning contracts and have to buy equipment to maintain those contracts and they are increasingly buying from us. James Bank – Sidoti & Company: So, how does that work. Does the national account come to you and purchase the equipment or does hypothetical an ABM come to you and purchase the equipment because they are the ones who have serviced or contracted this (inaudible) contract?

Generally, a building service contractor comes to us and purchase the equipment. There are some end-users – end-user national accounts that either own the equipment or they specify the equipment that the BSC needs to buy, but one of the things we are doing increasingly is that we are working both with the end-user and with the BSC to ensure that we can provide the best solution for both and we haven’t done that historically. Over the last 3 or 4 years, our focus has been on the BSC segment and not really focusing on end-users. I think we are getting a lot of benefit from working both sides of that equation. James Bank – Sidoti & Company: What percentage of your sales right now if you were to guess would be building service contractors versus as you put it the old industrial channel?

We haven’t provided that breakout yet James. I mean what we can is right now to-date our revenue growth with building service contractors on a global basis is our fastest growing part of our business. So it is, you know, it is a very important part of our business. We remain underrepresented and it is the fastest growing element of our business and a really important part of our future and we think it is one of the main reasons why we will continue to hold up significantly better than we did in previous tough economical times. James Bank – Sidoti & Company: Now, to start the year, was your guidance – your earnings guidance was that GAAP?

Yes. James Bank – Sidoti & Company: It was. Okay, so it has been GAAP.

We have been consistent in trying to – I shouldn’t say trying into providing the details within the GAAP numbers but the actual guidance numbers in all 3 where the started the year, where we provided last quarter, and where we are at now were all GAAP guidance numbers. James Bank – Sidoti & Company: Okay.

Hopefully, the schedule that we have provided in the release will allow you to pretty simply go between reported numbers and take it out, meaning GAAP in the unusuals are within those numbers, both from last year and this year. James Bank – Sidoti & Company: Now, within the quarter neither Applied or Alfa was dilutive to earnings?

Yes, we were actually dilutive by about a penny from both of the transactions in the quarter. James Bank – Sidoti & Company: So, $0.05 in the first quarter, and what was it, about $0.02 or $0.03 in the second?

Yes, we are at about $0.07 through the first nine months from a dilution standpoint. James Bank – Sidoti & Company: Okay, and how many shares were purchased in the quarter?

223. James Bank – Sidoti & Company: Okay, so, year-to-date?

I don’t think we have that number handy. We will have that number in just one second here. My memory is not that good. James Bank – Sidoti & Company: That is okay, and is there anything, what is left on that program?

Year-to-date we brought 450,000 shares and we have 289 remaining on it. James Bank – Sidoti & Company: Okay. And then sorry to jump around a little bit, but the replacement cycle for your equipment site what does that tend to be? And be as detailed or granular as you want or –

You know, it is so diverse depending upon the value of the equipment, the type of equipment, the environment that it is used in. But if you pick the round number you know, in the 5 to 6 year range would be a reasonable way to think about the replacement cycle, but again it is – there can be pieces of equipment that are smaller and used 24 hours a day that can have a very quick replacement cycle. There can be larger industrial type of equipment that when used appropriately and not in a suburban environment that will easily last in excess of 10 years. So it is really broad. James Bank – Sidoti & Company: Okay, all right, terrific. That is all I have. Thank you.

Thanks James.

Your next question comes from Robert Damron with 21st Century Equities. Your line is open. Mark Zinski – 21st Century Equities: Good morning. It is Mark Zinski actually.

Hi, Mark. How are you doing? Mark Zinski – 21st Century Equities: Good thanks. Just two quick questions. First of all, could I get some scope on how China is going in terms of efficiencies there and in terms of the market, commercial real estate apparently is slowing down a little bit there. Are you seeing from that or is that the expansion is so new that is really not having an impact on you? And then secondly in terms of your variable interest rate on your long-term debt, is that bumping up now?

Chris will take China and I will take about the interest rate here.

In China, the majority of our sales in China is still our big equipment. Sold into – into customers that have migrated manufacturing facilities and other operations to china. So that is still the majority of our business. We are – we now have a product portfolio with low cost commercial equipment for the first time and we are just beginning to penetrate the commercial marketplace. So, even with a slowdown versus historical growth rates, you know we are still underrepresented. You know, we – at least for now we should be able to see decent growth even in the current environment.

Okay, from an interest rate standpoint we are LIBOR plus on our facilities. So, we have seen a slight up-tick in our interest expense. So, we will – you know, we should see a slightly higher interest cost in the fourth quarter relative to the third quarter. Mark Zinski – 21st Century Equities: Great, that is it. Thanks a lot.

This concludes the question and answer session. Please stay on the line for final comments from the management team.

Thank you for your time today and for your questions. We are pleased with our continued progress on all of our key strategies and initiatives. Despite the current macroeconomic conditions, we remain confident in our business model and are firmly committed to the long-term strategic direction that we have established. We believe the continued focus on our strategies of international market expansions, new product and operating efficiency gains, coupled with strong cost controls positions us for long-term success. We look forward to keeping you posted on our progress. Take care.

This concludes your conference call for today. You may now disconnect.